Depending on what you’ve read or heard, the failure rate for small businesses in the first 5 years has been estimated to be anywhere from 40% to 90%. Whatever the actual figure, it’s higher than it needs to be.

Jack and I often find ourselves in a discussion about why small businesses fail and many people have asked us this question. Let me address this in two ways: i) the way small business owners see it, and ii) the way we see it.

First, let me define what I mean by “fail.” Failure to us simply means the business is no longer operating. It doesn’t matter whether it’s out of business due to a lack of demand or if the owner just didn’t want to commit the time any more. Failure simply means that the doors are now closed.

Let’s start with the small business owners’ reasons for why they fail (and why they are struggling):

1. Not Enough Money: this will usually sound like, “my business is undercapitalized,” or “I don’t have enough money to run my business,” or “I don’t have any cash in my bank account.” This is one of those fallacies that is rarely challenged. If you have a successful business, it will either fund itself from excess cash flow or you can craft a strong enough story to attract outside financing (i.e. debt or equity). If neither is possible, chances are you should be looking for another business.
2. Not Enough Sales: owners will often say that “all I need is more sales and all the other problems will go away.” This is true if a solid foundation exists in the business. Most small businesses we see would be out of business within a month if their current level of business doubled. They’re just not equipped to handle the growth with either systems or people. Also, there is a key word missing from this phrase…PROFIT! More profitable sales will help quite a bit!
3. Not Enough Time: this means the owner(s) is typically working many more hours and probably making less money than when they were working for someone else. Thankfully we all have the same 24 hours in the day. The key is to organize that time to focus your activities and those of your employees around a profit plan for the business.
4. Not Enough Good People: either they can’t find more people like the employees they have, or they can’t find any good employees at all. Interesting that we have found good people all over the place. Chances are, you’re just not attracting them to your business. A good starting point is to define what a good person looks like. What kind of personal characteristics, skills, drive, etc. makes a good employee for your business. Once you have clarity on this, you’ll be amazed how many “good people” start to pop up.

So now that you have the top reasons for why business owners feel they fail and our thoughts on those reasons, here’s our view for why companies fail:

1. Letting the People Get In The Way: there is one clarifying question that every business owner should ask himself when making a tough decision, “what’s best for the organization?” This very simple question often gets confused by the “people” side of the business and worrying about what’s best for Sally or Frank or whoever. At the end of the day, if the organization is doing well, all the individuals who are part of the organization will be doing well too.
2. Lack of Planning: one of the great things about most small business owners is that they’re willing to just blow into things to make things happen vs. delaying. Action is a big factor in most of these owners’ success. Usually early on in the business the owner will plan but as the company starts to grow, quite often the planning takes a back seat to the day-to-day grind. Our contention is that if you can’t put it down on paper, the chances of it happening in real time are very slim.
3. Lack of Understanding of the Numbers: most small business owners we’ve met do not run their business by the numbers. What this means is that it becomes nearly impossible for the owner to know how the business is doing without being there all the time. We have a client who runs a business that is about 1,000 miles away and he’s able to tell if someone is stealing from him just by seeing a change in the gross margin. Unfortunately, he’s in the extreme minority.
4. Delaying Decisions: a phrase we’re fond of telling business owners is that if you don’t make a decision, somebody else from the outside will make that decision eventually. Let me quote Theodore Roosevelt on this topic, “In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing.”
5. Unwillingness to Change: this is what we call the “old man” syndrome where owners will say things like “we’ve been doing it this way for years and it’s always worked for us.” Click here to view our “old man” post.
6. Losing Sight of the Bigger Picture: this problem is two-fold: i) owners will often lose sight of the fact that they’re in business to make a profit, and ii) owners often get so caught up in their own little world that they don’t look around at what’s happening either in their bigger market or in the world at large. Owners tend to get very emotionally involved in their business (it’s their baby) and they focus on the business to the exclusion of everything else going on around them. If the business isn’t making money, your job as the owner is to find a way for it to make money or GET OUT OF THE BUSINESS. There are lots of other ways to make money!

One of the dirty little secrets about running a small business is that to run it well can be really pretty BORING. Just doing a lot of the basic blocking and tackling is what makes a business succeed and continue to be profitable.

The mission of our business coaching at MVP is to help reduce the number of small business failures. In a perfect world we wouldn’t see any small businesses failing, they’d just shift their focus to a more profitable venture.

“Money, its a gas.
Grab that cash with both hands and make a stash.”
Pink Floyd

Things in business can often get confusing. After all, isn’t every business in business to make money? So shouldn’t that be the #1 focus?

Well, perhaps surprisingly to some, the answer is a definitive NO!

Now this may sound like a surprising response from a business coach. I mean, aren’t we in the business of helping our clients increase their profitability and thus “make more money?”

Well, yes, but it doesn’t sound like this: “we’ve got to help you make more money.” Let me share a story with you to illustrate my point.

Jack and I have an inside joke about a guy named Chuck. Our buddy Chuck is a facilities manager for a company, which basically means he’s the “sheriff” in town when it comes to policing how the facility is being used.

Well, we utilize this facility quite a bit as part of our business and we bring a lot of people through this facility. Once in a while we’ll ask the staff if we can use a private room for an hour or two. Keep in mind, this is a room that is otherwise not being used. This usually works out just fine until Chuck gets involved.

The conversation goes a little something like this:

Chuck: “Hey, what are you doing in here?”
Us: “Well, we spoke to Sally and she said we could use this room for some privacy for the next hour. We promised to return everything to its original condition so it’ll be like we were never here.”
Chuck: “She’s not supposed to do that. You have to pay to use these rooms. We’re trying to make some money around here!“

Whenever we need a good laugh, I’ll mention the phrase “we’re trying to make some money around here” to Jack and we’ll both smile just like I am now while writing this.

Our poor friend Chuck is missing the point. While we fully understand that they’re in business to make a profit, Chuck has completely lost sight for just HOW that “making money” thing happens.

It’s not his fault of course. Chuck’s just trying to do his job. I’m sure one of Chuck’s supervisors reminded Chuck of the fact that they’re in business to make money at some point and it has obviously stuck in his head. Can you imagine how good Chuck would be if his supervisor had actually shared with him just “how” they make money?

Can you imagine having dinner at your favorite restaurant and the manager coming by your table during the meal and saying, “Are you almost finished, we’re trying to make some money around here and we’d like to use this table two more times again tonight?”

Sounds crazy right? I mean, that would probably be the last time you’d go to that restaurant.

If you’re in business, don’t worry, your customers know you’re in business to make money. The key for you and your staff is to not make them feel that way.

This is where those phrases like customer service come in. The way to really make money is to constantly deliver value to your customers. Depending on your business, what the customer views as “valuable” will differ.

For instance, if you’re in a retail business, one of the things that customers may perceive as valuable is that you and your staff greet them by name when they enter your store. It makes them feel welcome and special. Of course they realize you know their name because they frequent your store often and that your business has made a profit on them over time. Just realize they aren’t showing up to make you money. They show up to get their needs satisfied.

That’s the trick. All customers know that you’re in business to make money. The way you get them to invest their money in your business might vary, but one sure way to make this happen is to have the focus be on the customer and their wants and needs.

Your customer wants your product or service. They want to buy it in their own way. They want you to focus on them. Not the fact that “you’re here to make money.”

Here are a couple of ways to figure out how to make more money by focusing on your customer:

1. Ask Your Customers: guess what? Your customers will typically tell you what they want if you just ask them. Ask them what you’re doing right and what you’re doing wrong. People love to have their voices heard.
2. Define What You’re Selling: we often get lost in our product or service when people ask us what we do. For instance, an Italian restaurant might say “we sell the best pasta in town.” But your customers aren’t just buying pasta. They could do that just about anywhere. They’re buying the entire dining experience at your restaurant. This includes the way the restaurant is laid out, how they’re greeted when they enter the restaurant, the music being played, the way the tables are arranged, the friendliness of the staff, the speed of the service, the options available, the price, and of course the pasta!
3. Make Sure Your Staff Knows: while it’s important for your staff to be reminded that you’re in business to make money, it’s more important for them to remember “how” your business makes money. That the customer needs to perceive value in everything that is delivered. Engage your staff in trying to figure out exactly what it is that you’re selling. You might be surprised what you hear.

If you’re doing the right things in your business, the money will follow. If you’re primary focus is on the money itself vs. delivering true value, then the making money part will be a constant struggle and quite frankly, will be tremendously unfulfilling.

Do you know somebody who sounds like Chuck? If so, can you please help him out? We’ll all be better off!

You know, I was thinking the other day that you can tell a lot about a leader based on how they follow.

Over the past several months I’ve been involved as a volunteer with a group of high schoolers who were participating in a Junior Achievement program.

During a 3 month period these teenagers had to start a company from scratch, make a profit, present their business to a panel of judges, compete against three other schools, and then shut the business down.

All of this had to be done with other students in their class, some of whom they had never met before.

One of the first actions of this newly formed company was to elect its officers including the President and five Vice Presidents. Each student had the chance to prepare a two minute presentation outlining why they should be chosen for a particular role.

Out of the class of 24 students, nearly all of them ran for one or multiple offices.

What I noticed over time was that many of those students who had run for office, but had not been elected, actually wound up contributing very little to the company. In some cases, they became very negative and a drain on the organization.

Many of these students were leaders in other capacities in school (e.g. sports team captains, heads of various clubs, etc.). It got me to thinking that you really can tell a lot about a leader based on how they follow.

This is something I’ve had to consciously work on myself as well. It’s one thing to be the person running a group or organization, it’s a whole other thing to be the one following.

Here are some of the things I’ve learned that have helped me be a good follower, and things I saw (and hoped to see more of) from the students:

1. Stay positive: I always say that attitudes and energy are contagious. If you’re negative, chances are you’re going to infect others with that negativity. The same is true for being positive. Since you have a choice, why not focus on being positive and finding the good in things.
2. Offer solutions: one of the temptations when following is to become a “problem identifier.” This doesn’t help move an organization forward unless you present some solutions. So if you’re going to bring up a shortcoming or something you’d like to see changed, make sure you’re prepared to offer one or more alternatives to the current situation.
3. Move forward: when something has happened that you don’t like and you “knew” ahead of time that it probably wouldn’t work out, it’s tempting to say “I told you so” and continue to reflect on the past. What I’ve found is that aside from doing a little autopsy to see why something happened and what can be learned from it, you should spend your time looking forward and focusing on what you’re going to do next instead of rehashing the past. I mean, there’s nothing you can do about it now so focus your energy on things you can impact.
4. Best ideas win: if you have good ideas and input, you’ll be able to influence any situation you’re involved in. People are generally pretty smart and they typically don’t care where an idea comes from as long as it’s a good one. Folks who are in the leadership of an organization haven’t cornered the market on good ideas.
5. Support leaders publicly: and be sure to bring up criticisms in private. It’s rare that a leader will change her position on something because you have publicly voiced your opposing view. Most good leaders are looking for feedback on their decisions, but don’t want to be “embarrassed” or have to fight battles in public. If you feel strongly about something, be sure to get a moment when you can pull the leader aside and make your case. Sometimes the leader will appreciate your input and you’ll notice changes in the future. Often, folks who are in leadership positions, but aren’t really leaders, will basically blow you off and will not be open to feedback that questions their decisions. If you have one of these, bide your time because they will soon take themselves out!

The good news about the high school students was that they were able to overcome many of these obstacles and they had enough leaders who were good followers that they not only had a successful company (they made a $2,500 profit that was donated to charity), but they also won their competition against the three other schools.

I’m convinced that having good followers was a big key to that victory! Do you have any good “follower” stories you’d like to share?

It’s common knowledge that fear of public speaking is one of the top fears for most people (not you of course). Why is that?

I was at a Rotary breakfast the other day and the featured speaker was an 18-year old exchange student from Hamburg, Germany.

Now here is an 18-year old addressing about 100 adults over breakfast in something other than his native tongue (i.e. English instead of German).

Now by no means was his speech flawless, few speeches ever are. But he delivered it with such confidence and in such an unassuming way that everyone enjoyed it. There were lots of smiles and jokes and questions from the audience.

So what can an 18-year old exchange student teach us about public speaking? Well, here are a few things I took away from it:

1. Go with the flow: things rarely go exactly as planned, whether it’s during a presentation or in life. So expect that things will go wrong and adjust. Remember, you’re the one in control of this presentation.
2. Know your material: you’re in the front of the room for a reason. YOU’RE THE EXPERT ON THIS MATERIAL!! In the case of our German exchange student, he was sharing information about his family, his hometown, and his experiences while here in the U.S.
3. Focus on the audience NOT YOURSELF: remember that the focus of your presentation is your audience, NOT YOU! Most of the fear and anxiety people experience with public speaking is wrapped up in them focusing on and worrying about themselves. What will people think of me? How do I look? Am I talking too fast? Instead of asking so many questions about yourself, how about some questions about your audience? What is my audience hoping to get out of my presentation? Do they seem interested and engaged (i.e. taking notes and smiling at me) or do they seem bored out of their minds (i.e. nodding off or texting their friends)?
4. Keep time: few things will annoy your audience more than you going over your allotted time. If you have 20 minutes to present, make sure you’re done in 18 minutes. Everyone will be happy because you finished early. It’s a great way to win over the audience. This also gives additional time for questions from the audience. Then you can really address things they’re interested in!
5. Don’t be stuck to your PowerPoint: I personally will rarely use PowerPoint. I’ll use a few handouts and whiteboards or flip charts to sketch out concepts. If you do use PowerPoint, don’t be wedded to it. Keep the bullets short and sweet and use them as crib notes for the points you want to make. Don’t read the bullets or “memorize” your speech, you’ll put your audience to sleep! And don’t worry about having to cover ALL THE MATERIAL in your PowerPoint. I recently saw a presenter respond to someone’s question during the presentation by saying “he didn’t have time to answer the question because he had so much material to cover.” HELLO, your audience is telling you what they want to know about! I pretty much stopped listening at that point, and I’m sure the questioner stopped listening too. Again, it’s NOT ABOUT YOU!
6. Get moving: don’t be stuck in one place when presenting. Make sure you’re moving around the room as you make different points in your presentation. Feel free to approach your audience and even go into the audience to help keep them engaged. Think Phil Donahue!

I’m convinced that with a little practice and by keeping things simple, anyone can be an effective public speaker. Let me know what else you have found to help you or others be effective public speakers.

One of my favorite superheroes growing up was Batman. My favorite shows almost always included my favorite arch-villain too, The Joker!

Jack Nicholson reprised this role of The Joker beautifully in the 1989 version of Batman the movie.

I was reminded of this character at a recent networking event where I met someone who had what I refer to as “The Joker” smile.

I gave this poor fellow the benefit of the doubt. Chances are, he had read about or been told that you’re supposed to smile when you are at networking events and meeting new people.

This is something I’m familiar with since it’s something I’ve heard hundreds of times.

I’m guessing this guy is naturally more reserved like me. One of the challenges us reserved folks have is showing how we’re feeling about something. We tend to have what people refer to as a “poker face.”

So even if we’re feeling good and are interested in what someone is saying, we might not show it outwardly.

A tip I’ve heard many times is to “make sure you smile more.” That holds true whether meeting someone 1-on-1 or if you happen to be presenting to a group.

One of the things I’m always conscious about is making sure my smile is genuine. Otherwise I’ve found that people will be uncomfortable. They’ll sense something isn’t quite right. They may even think the smile is a bit forced and disingenuous. That’s worse than not smiling at all!

Here are a few things that have worked for me to make sure my smile is genuine. You may want to give them a try:

1. Remember to breathe: as simple as this might sound, whenever people are feeling a bit anxious or stressed, they often forget to breathe. No, they don’t stop breathing and die, they just forget to take normal repetitive breaths which helps to calm the body. So try a couple of deeps breaths where you breathe in through your nose for 10 seconds and breathe out through your mouth for 10 seconds. Try this 2 or 3 times in a row and I guarantee you’ll feel more like yourself.
2. Don’t overthink: sometimes we can get in our own way by thinking about something too much. Overthinking typically leads to stress and tightening up and it’s hard to smile when you’re not relaxed.
3. Don’t overdo it: it’s good to smile, but if you’re not an “over-the-top” outgoing person, don’t pretend to be. It’s too far outside your normal operating style for you to jump into comfortably without years of practice. Even then, chances are it still won’t appear to be genuine. So just go with a more reserved smile!
4. Happy thoughts: pause for a minute to think of something that brings a smile to your face. Perhaps it’s a spouse or a child, maybe even a vacation spot. Visualization like this can be a powerful thing.
5. Don’t fake it: if you’re not in a good mood or things are a bit stressed, don’t try to pretend everything is OK because people will typically know. Try to go for a more even keel approach on these days.

Thanks for your help in my “anti-Joker” campaign. If you meet a Joker this week, feel free to pass along this note to them.

Let me know if you find anything else that works well for you.

So I was at a concert a few weeks ago for a Dave Matthews Band tribute band called Trippin Billies. Let me start by saying the band sounded tremendous. But they certainly weren’t all on the same page.

The best test for a cover band is to close your eyes and listen to them and see if you can pretend you’re at a concert for the band they’re covering. These guys certainly had that.

The problems started when I opened my eyes. It became clear very quickly that 5 of the 6 members were on the same page, but 1 person was on his own page.

Here are a couple of thoughts I had during the show:

1. It’s bad for the entire team when 1 person stands out: in the case of Trippin Billies, it was obvious to everyone that the lead guitarist thought the show was about him instead of the music. He was in his own world, seemingly oblivious to how he was perceived by the audience and his fellow band mates.
2. Sometimes it takes 2 people to replace 1 person: Dave Matthews is one of those special talents. He has a unique singing voice, is a tremendously talented guitarist, and writes some fantastic songs. In the case of Trippin Billies, they have a lead singer who sounds hauntingly like Dave and the lead guitarist does a great job with the chords.
3. The show must go on: one of the things I appreciated about Trippin Billies is that even though it appeared that every band member was aware of the problem with the guitarist, each of them gave it their all as part of the performance.

So, have you seen this problem in your business? Are perhaps you the problem?

Here are some suggestions to figure out if your band members are all on the same page or not:

1. Get some feedback: this can be both internal (i.e. your employees) and external (i.e. your customers). I’m sure if the guitarist had asked for some anonymous feedback from both his band mates and the audience, he would have learned quite a bit about how he is perceived.
2. Be sensitive to non-verbal cues from those around you: common courtesy dictates that we often don’t say what we feel because we don’t want to hurt other people’s feelings. If you’re “paying attention,” you can usually pick up on some of the non-verbal cues (e.g. body language, apparent loss of interest) of your “audience.”
3. Don’t take yourself too seriously: we can sometimes be a bit too intense and focused and thus lose the ability to poke fun at ourselves. Being able to laugh at yourself is one of the most endearing qualities to display and will buy you a lot of leeway with your band mates and your audience.

Your band (i.e. your company) can still be relatively great in spite of some players not being on the same page. But just think about how much better your band will be when all players are on the same page!

I received an email from a friend earlier this week entitled “Personal Balance in Demanding Times” with the following question:

“How can we balance our personal needs with the most pressing needs of our community and the larger world?”

Her email continued with some deeper questions including:

- How are you doing this balancing act?
- Who do you know who seems to balance well and what do they know?
- How does your life touch the life of the larger world and what would allow you to feed your personal life while making a difference “out there”?
- How can you feel satisfied you’ve given enough to yourself, your family and your community?

Some pretty deep stuff, right? All variations of questions I’ve asked myself over the years. Perhaps you have as well.

So after pondering these questions for a day or so, here’s what I came up with.

My short answer to the “giving back to my community and the larger world” question is that I’ve become involved in Rotary International, an international service organization. I’m a member of my club in North Ridgeville. This has provided a tremendous outlet for me to not only give back to my local community, but to have an impact on people around the world.

I’ve only been a member of the club for about 2.5 years, but we’ve done so much as a club over the years. We are actively involved with:

1. Assisting local charities (e.g. Community Care in North Ridgeville which helps people who are down on their luck get back on their feet by providing some basic necessities),
2. Improving the local community (recent projects include the reconstruction of Safetyville which is a miniature town that is used to teach kids about safety as it relates to fire, crossing the street, etc.),
3. Having an impact on the youth of our community (e.g. ongoing sponsorship and support of the high school Rotary Club, an annual fishing derby for mentally challenged kids, and supplying dictionaries to all third graders in our city), and
4. Funding some pretty amazing projects overseas (e.g. providing medical supplies to the Ivory Coast, helping to fund children coming to the U.S. to have life-saving surgeries that could not be provided in their own countries).

Our club currently has about 45 members. We meet weekly for lunch and then we each spend a few hours a month helping out on these various projects. Many hands truly make light work.

Rotary International has over 1.2 million members in over 200 countries worldwide. I have found this to be a great way for me to give back and help those in need without having to do it all myself and thus maintaining a relative “balance” in my life.

Like anything else, once you know what you’re looking for, chances are you’ll find it. The way I discovered Rotary was sitting down and talking with a friend about what he did to give back to our community.

When talking about things like “balance,” I guess it comes down to how you define balance. The way I look at is I like to spend my time doing things that are both “of value” and that “I value.”

Helping people with both physical time and effort as well as with financial support is something that is important to me. So is spending time with my family. So is working with small business owners to help them get where they want to go.

The more waking hours I can spend doing the things that are both “of value” and that “I value” leads to what I would call a pretty good balance. When I can, I’ll bring those three worlds together (service, family, and business) so they can each be involved and interact. That seems like a pretty good balance to me! How do you define balance?

We always have a lot of fun with our business coaching clients. And, believe it or not, one of the funnest discussions we have with our clients early on is helping them to understand their financial statements.

Most business owners (not you of course) do not know how to use and interpret their financial statements. But they won’t tell anybody! Why? Well, usually it’s because they’re embarrassed to admit that they don’t know. Everyone has always assumed that they know what they are doing when it comes to financials, so far be it from them to set the outsiders straight!

How silly! Guess what? Most other small business owners don’t know how to use their financial statements either! It’s one of those dirty little secrets in small business that no one talks about.

Our experience has shown that about 1 in 10 small business owners understand and can present their financial statements, let alone define what they are!

That leaves 90% of small business owners stuck somewhere between running their company out of their checkbook and being able to read and interpret some of what is presented on their financial statements.

If you’re like most small business owners, you’re not really going to learn about financial statements in a class or by reading a book. The best way to learn is to use the numbers from your own business first.

I took some accounting classes as part of my business degree and Jack even majored in accounting! It took each of us several years to understand how to apply that theory to the real world of business.

I cut my teeth on Wall Street as an investment banker, tearing apart the financial statements of everything from small private companies to multi-billion dollar international corporations. Jack spent the first 17 years of his career setting up internal audit functions for two large public companies and then working in operations.

Jack is fond of telling the story of his neighbor growing up who owned an auto repair shop. Jack had just returned home after graduating from Ohio University with a degree in accounting. So the owner of the auto repair shop comes to Jack and says, “hey newly minted college graduate, can you put together a set of books for me?”

Jack of course says, “no problem,” and proceeds to review the figures for this auto repair shop. It didn’t take Jack long to realize that he didn’t know what he was looking at or how to put together a set of “books” for this business!

So why do you think you should be able to read a book or go to a 2-hour workshop and suddenly understand your financials?

This stuff is hard! But there are few things that could be more important in a business than you as the owner understanding how to use and interpret your financial statements.

Let’s start at the beginning. What are the financial statements?

1. Balance Sheet: shows the Assets, Liabilities, and Equity of your business. This is basically what you own (Assets), what you owe (Liabilities), and what’s left (Equity). Think of the balance sheet as a snap shot (i.e. a picture) at a particular point in time. It encompasses the activity of your company since day one.
2. Income Statement or Profit & Loss Statement: shows all the revenue/sales and expenses in your business. Subtracting the expenses from your revenue/sales shows the net income or net profit for your business over a specified period of time (e.g. a month, a quarter, a year, etc.).
3. Statement of Cash Flows: this shows all the cash coming in and going out of your business and may be quite different from your Income Statement (#2 above). This statement is also based on a specified period of time like the Income Statement.
4. Statement of Retained Earnings: this shows the changes in the equity balance from year to year.

Whether you are a small private company or a public company trading on the New York Stock Exchange, financial statements mean the same thing. The only difference between a small private company and a public company is how many zeros there are in your numbers!

OK, so now that you know what financial statements are, how do you use them? For most small private companies, the two key reports are #1 and #2 (the Balance Sheet and the Income Statement). What you’d like to be able to do is compare these statements to something instead of just reviewing them in a vacuum.

Here are some tips for what you will want to review on a monthly basis:

1. Balance Sheets
- Current vs. prior month and year (e.g. if you are reviewing the February 29, 2008 balance sheet, you’ll want to compare it to the January 31, 2008 and February 28, 2007 balance sheets)
- Look for significant changes from one balance sheet to the other and make sure you can explain the differences (e.g. if your Accounts Receivable has increased by $20,000, you’ll want to know why it increased by that much)
- Discuss key cash flow items (e.g. Accounts Receivable and Accounts Payable aging schedules) to make sure more people owe you money than you owe money to. Also you’ll want to make sure that people who owe you money are paying in a timely manner and that you are paying people you owe money to in a timely manner as well, but not too quickly
- Review liquidity ratios (e.g. current ratio) which is the result of dividing your current assets by current liabilities; you’ll want that ratio to be more than 1 to 1 to know you’re in pretty good shape
- Analyze leverage ratios (e.g. debt/equity, debt/cash flow) to give you a sense for how well your cash flow covers your debt obligations
2. Income Statements
- Actual vs. plan for current month and year-to-date (”YTD”) (e.g. if you’re reviewing the income statement for the month of February 2008, you’ll want to compare that month to your plan for the month and compare your YTD results for January and February to the plan for that time period as well to see how you’re doing)
- Actual vs. prior for current month and YTD (e.g. if you’re reviewing the income statement for the month of February 2008, you’ll want to compare that month to your February 2007 results and compare your YTD results for January and February 2008 to the results for January and February of 2007 to see how you’re doing)
- Discuss & explain variations from plan and prior periods for revenue, gross margin, cash flow, net income

In addition to these monthly reports, you’ll want to review certain items more frequently (perhaps weekly or even daily). These other items include your sales backlog, your current cash balance, your 90-day projected cash flow, and any issues related to your customers, vendors, employees/contractors, and product/service.

The biggest thing to keep in mind when reviewing financial statements is that you want to be able to explain big changes from one period to the next, whether positive or negative. If you get into the routine of reviewing your financial statements regularly, you can be sure you’ll be aware of any trends in your business while you still have a chance to impact them.

OK, that’s enough financial stuff for one day to try to absorb. Remember, it all starts with knowing how to respond to the question, “can you tell me what your financial statements are?”

If you can respond by reciting the four components that encompass the financial statements (balance sheet, income statement, statement of cash flows, and statement of retained earnings), then you will be well ahead of the class already!

You know what I hate? Excuses!

We’ve all made them before and most of us still make them. Why?

Maybe it helps relieve the feelings of guilt when we’re making the excuses for ourselves. Perhaps they help us avoid a potential conflict or uncomfortable situation when we make them for others.

I’m sure there are lots of other reasons why we make excuses. The popular culture today talks about lack of accountability. A lack of holding ourselves accountable or holding others accountable.

I’m not sure that’s the answer. I think it’s probably more the case of an inability to say no or to clarify expectations up front.

Everybody is so “busy” these days doing lots of stuff. Usually there is some combination of work, family, and service obligations. This doesn’t allow for downtime or entertainment, let alone time to get everything done that we’ve promised to do.

The reason I hate excuses is that they suck the energy out of situations. Solutions, on the other hand, inject energy. So why not focus on solutions instead of making excuses? On something that injects rather than drains energy?

Here are some tips for how to stop making excuses:

1. Don’t bite off more than you can chew: when someone asks you to do something, make sure you know what all is entailed. If you think something will take you a couple of hours to complete, but it really takes weeks or months, you’ll be doomed from the start. It’s OK to say NO! The worst thing to do is to say yes and then not be able to deliver. That will do more harm to your reputation than simply saying no up front.
2. Communicate, communicate, communicate: this is something so simple, yet most people don’t do it. Just keep people in the loop. If people aren’t kept informed, their imaginations tend to run wild. They’ll begin to wonder what is going on and will inevitably make up different scenarios in their mind as to why something isn’t done yet and that creates a lot of stress. Just keep them in the loop and a lot of this stress will be avoided.
3. Under Promise and Over Deliver: I’m sure we’ve all experienced both sides of this. People or companies who consistently either over or under promise and then under or over deliver. I just had an experience with Dell Computer where they under promised and over delivered. They told me I wouldn’t have a new power cord for my laptop for about 2 weeks and I wound up receiving it in 3 days. So how do you think I feel about Dell? Pretty good right?
4. Do what you say you’re going to do: this simple philosophy is something I’ve tried to live by for years. That way people know what to expect. I can’t tell you how many folks I’ve met in both personal and business situations who don’t do this simple thing. Do you know how difficult it is for people to trust you if you don’t do what you say you’re going to do?

At the end of the day, no one really cares why something isn’t done. Especially your customers. They only care about what they want. If you can’t or won’t give it to them, you can bet they’ll be searching for someone who will.

SO STOP MAKING EXCUSES and start making things happen!

Many people are natural worriers. We all know some. Maybe you’re one of them.

I’ve lived by the following philosophy for most of my life:

“If I can do something about it, do it. If I can’t, don’t worry about it and move on to something else.”

I’ve heard people describe this in different ways over the years. Stephen Covey, in his book The 7 Habits of Highly Effective People, talks about Circles of Influence vs. Circles of Concern. He boils the problems we face down into one of three areas:

1. Direct Control: problems involving our own behavior
2. Indirect Control: problems involving other people’s behavior
3. No Control: problems we can do nothing about, such as our past or situational realities

It basically boils down that we can impact #1 and #2, but we need to learn to accept and live with items that fall into #3. Even if we don’t like them.

Covey even makes the connection to the serenity prayer from Alcoholics Anonymous:

“Lord, give me the courage to change the things which can and ought to be changed, the serenity to accept the things which cannot be changed, and the wisdom to know the difference.”

Many of our business coaching clients are natural worriers. Even when things are going well, they are focused on and worried about things that aren’t going well.

One of the things we spend time on with our clients is helping them put their business and its results into perspective.

A favorite question we ask our clients is “what are you worried about?” Most recognize themselves as worriers, but aren’t sure what to do about it.

Either that, or they are so used to being that way that they are unwilling to change. It’s almost like having a pebble in your shoe. I think they’re afraid that if they remove that pebble, they just might miss it.

Imagine if we were able to bottle up all that negative energy spent on worrying and put it to some good use. Heck, what if we could bottle up only 10% of it? How much better off would we be?

If you’re a natural worrier, take a little time to reflect this weekend and perhaps say the serenity prayer each morning to see what you can do to stop worrying so much!

I think you’ll be amazed how much more you can get done when you focus your time and energy on things you can impact. Good luck!